Shifting Gears: Routes to success
The Portfolio Construction and Strategy (PCS) Team at Janus Henderson outlines their framework for activating a goals-based fixed income strategy.
5 minute read
Key takeaways:
- After navigating several market scenarios over the last decade – all of which conspired to negatively impact traditional core, duration-sensitive fixed income – investors would be wise to reframe expectations for what is ahead instead of focusing on what is in the rearview mirror.
- As we move into an environment of higher starting yields, we think the best solution is to take a step back and consider a long-term strategic mix built around an investor’s goals.
- Here, we outline a goals-based, forward-looking framework that organizes the breadth of fixed income instruments into four objectives: Preserve, Defend, Diversify, and Increase Income.
For financial professionals, fixed income allocations can have profound consequences for their entire portfolio. In this decade alone, investors have faced several market scenarios, beginning with low interest rates and benign spreads, moving to illiquidity and wide spreads, which then turned into high inflation, higher correlations, and higher interest rate volatility.
All of these market scenarios conspired to negatively impact traditional core, duration-sensitive fixed income (e.g. Aggregate Bond), which in 2022 experienced one of its worst drawdowns in history. However, investors would be wise to reframe expectations for what is ahead, instead of focusing on what is in the rearview mirror. Yields across all fixed income sectors have reset at levels not seen since before the Global Financial Crisis. We believe that a more diversified fixed income allocation can offer investors the ability to achieve greater total return for less risk, allowing it to firmly reassert itself as a ballast within portfolios.
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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
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5 minute read
Key takeaways:
- After navigating several market scenarios over the last decade – all of which conspired to negatively impact traditional core, duration-sensitive fixed income – investors would be wise to reframe expectations for what is ahead instead of focusing on what is in the rearview mirror.
- As we move into an environment of higher starting yields, we think the best solution is to take a step back and consider a long-term strategic mix built around an investor’s goals.
- Here, we outline a goals-based, forward-looking framework that organizes the breadth of fixed income instruments into four objectives: Preserve, Defend, Diversify, and Increase Income.